The emergence of green bonds presents an attractive sustainable vehicle for fixed income investors, though not without drawbacks. The potential value of green bonds is obvious from the name; the securities prioritize the importance of environmental concerns as a means of either reducing risk or forming a competitive advantage when using the proceeds from the sale of the note.
Few things in this world can be predicted with accuracy over multiyear periods and fewer still over multidecade spans. One exception is population demographics. Based on data today, we have a good idea how populations will develop through 2050.
As we observe events in realms such as financial markets, politics, or weather, we tend to form beliefs — be they explicit or implicit beliefs — about cause and effect, or whether the events were positive or negative, good or bad. Science has formalized this process: testing a hypothesis with empirical data. One of the tradeoffs when evaluating beliefs in light of evidence, or a hypothesis in light of data, is the type of error we would prefer if our beliefs turn out to be wrong. In the investment realm, this bias can affect our beliefs and behaviors, such as our tolerance for risk and our allocation choices. Several examples will help illustrate this point.
At one point or another, we have all heard the saying "out with old, in with the new." We do not need to look too far in this modern technological age to find cogent examples, including...
In the context of investing, the term 'sustainability' lacks sharply defined boundaries. This broad label tends to create more confusion than clarity, prompting some advisors to simply skip it and move on.